The European economy in 2011

13 January 2011

Fabian Zuleeg, Chief Economist, European Policy Centre, said that experience of recent years demonstrates that risks need to be taken into account far more strongly. Emerging economies have become much more important in the global economic system, leading the recovery in trade and investment. China has replaced Germany as the world export champion, an indicator that Europe is not as important in the global economy as it was before the economic crisis.

Prospects for 2011 include risks that a slow down in Germany’s growth would affect European growth, unsustainable deficits and debt levels in most EU countries, and increasing divergence in the Eurozone.

Jean-Luc Schneider, Deputy Director, Policy Studies Branch of the Economics Department, OECD said that recovery is taking place and the pattern of growth in 2011 is the same in all big OECD areas but the pace is still sluggish, and there remains a significant amount of risk.

Emerging-market economies continue to underpin the global recovery. Fiscal policy is shifting from stimulus to contraction, reflecting the need for fiscal consolidation to keep interest rates and government bonds at reasonable levels, and to preserve long-term growth. It is, however, still likely to weigh on short-term growth prospects.

Marco Buti, Director-General for Economic and Financial Affairs, European Commission, said that the EU would continue to recover through 2011 and 2012, but this would be subdued. Both growth and output have taken ‘a hit’ following the crisis. The German economy profited from a strong rebound in trade and good performance of some emerging economies, and there is now a rebalancing of the economy through good labour market policies, and public finance adjustments.

European countries that performed well before the crisis will undergo a period of subdued performance and output contractions to re-absorb the imbalances and regain competitiveness.

Göran Hultin, EU Affairs Adviser, Manpower presented statistics to show the global employment outlook, which is generally positive, although the post-crisis strengthening of employment is slowing down. Since the beginning of last year employment was continuously strengthening but now into the first quarter it is tapering off. Globally the post-crisis rate of employment is slowing down and that reflects, in the Euro area especially, some of the financial uncertainties that are around. Part-time and temporary employment is growing. Job vacancies are starting to increase and, if the global economy continues to develop ‘without major hiccups’ employers will be forced to create new employment opportunities.